Reports: United dropping plans to acquire US Airways |

Reports: United dropping plans to acquire US Airways

NEW YORK (AP) – United Airlines is abandoning its $4.3 billion purchase of US Airways, citing regulatory problems and the worsening economy, according to published reports.

United told US Airways last week that it wants to discuss terminating their agreement before Aug. 1, the first day either side can alter the deal, The New York Times and The Wall Street Journal reported on their Web sites Sunday, citing sources familiar with the discussion.

If United ends the agreement, it will have to pay US Airways a breakup fee of $50 million.

Representatives for both airlines Sunday declined to comment to The Associated Press on the reports, versions of which appeared in The Washington Post and the Charlotte Observer over the weekend. Both papers also cited sources familiar with the discussions.

The Journal said that United, the nation’s second-largest airline, has become convinced in recent days that its merger won’t win Justice Department approval.

In an effort to ease anti-competitive concerns and ensure government approval, United agreed in January to sell some US Airways assets to American Airlines, including half of US Airways’ Washington-New York-Boston shuttle.

But Justice Department lawyers appeared to remain concerned about the concentration of market power in Washington and other markets, prompting Transportation Secretary Norman Y. Mineta last month to say he expected the government to reject the proposed merger.

A weakening economy is also apparently hurting United’s parent, UAL Corp., and sources told the Journal that the airline was unwilling at this time to engage in a costly, complicated merger.

United reported a worse-than-expected first quarter loss of $313 million on revenues of $4.42 billion and has already said it expects a double-digit decline in revenue for the second quarter.

The deal values US Airways at about $60 a share, more than double the US Airways current stock price of $24.30.

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